AXAS Abraxas Petroleum Corporation (CE)

Abraxas Petroleum Corporation (NASDAQ:AXAS) today reported financial and operating results for the three and twelve months ended December 31, 2018.

Financial Highlights for the Three Months Ended December 31, 2018

The three months ended December 31, 2018 resulted in:

• Production of 965 MBoe (10,493 Boepd)
• Revenue of $36.0 million
• Net income of $55.8 million, or $ 0.34 per share
• Adjusted net income(a) (excluding certain non-cash items) of $4.1 million, or $ 0.02 per share
• EBITDA(a) of $20.1 million
• Adjusted EBITDA per bank loan covenants of $20.1 million(a)

  (a)   See reconciliation of non-GAAP financial measures below.  

Financial Highlights for the Twelve Months Ended December 31, 2018

The twelve months ended December 31, 2018 resulted in:

• Production of 3.6 MMBoe (9,809 Boepd)
• Revenue of $149.2 million
• Net income of $57.8 million, or $ 0.35 per share
• Adjusted net income(a) (excluding certain non-cash items) of $30.7 million, or $ 0.19 per share
• EBITDA(a) of $83.9 million
• Adjusted EBITDA per bank loan covenants of $84.2 million(a)

  (a)   See reconciliation of non-GAAP financial measures below.  

Operational Highlights for the Three Months Ended December 31, 2018:

Williston Basin, North Dakota

Western North Dakota has experienced one of the coldest winters on record. Abraxas has experienced several days when all surface work was shut down due to temperatures and wind chill that put personnel safety and equipment reliability in jeopardy. The Ravin NE Pad is still under production restriction due to a natural gas pipeline installation delay requiring the flaring of all gas production from this pad. The pipeline is scheduled to be in service within the next two weeks at which point we are expecting normal production operations to be resumed. The Abraxas Raven Rig#1 is scheduled to be started up within the next several months to begin drilling operations on the six well Jore Extension Pad.

Delaware Basin, West Texas

In the Delaware Basin of West Texas, the Company has successfully drilled, completed and started flowback on the two well Creosote Pad in Ward County, where Abraxas now owns an approximate 95% working interest. The Wolfcamp A-1 and A-2 were targeted with a 26 stage fracture treatment (frac) in 5,000’ laterals. The one well Hackberry pad has been successfully drilled and a 26 stage fracture treatment in the Wolfcamp A-1 is scheduled to start next Monday. Abraxas owns an approximate 75% working interest in this 5,000’ lateral well located in Winkler County. The Company is currently drilling a two well pad, Woodberry, in which we own a 100% working interest. The Woodberry Pad adjoins our Caprito block in Ward County.

Year End 2018 Reserves

The Company’s total proved reserves at December 31, 2018 were 67.2 million barrels of oil equivalent (MMBOE), an increase of 2.8% over year end 2017 after production of 3.6 MMBOE and property divestitures of 3.8 MMBOE. The SEC PV10 (a non-GAAP measure) was approximately $689 million. SEC pricing was $65.56 per barrel for oil and $3.03 per mcf for gas. Proved developed reserves were 24.6 MMBOE, or 37% of the total. Oil represented 63% of total proved reserves, natural gas 22%, and natural gas liquids 15%.

A summary of the Company’s estimated proved reserves at year-end 2018, which were prepared in accordance with Securities and Exchange Commission (“SEC”) guidelines by LaRoche Petroleum Consultants, Ltd. (“LaRoche”), an independent petroleum engineering firm, are shown in the table below.

 

Year-End 2018 SEC Proved Reserves

          Reserve Category

Oil(MBbls)

Gas(MMcf)

NGL(MBbls)

Total(Mboe)

PV-10 ($ inthousands)

Proved Developed 13,586 43,271 3,804 24,602 381,879 Proved Undeveloped 28,651 46,473 6,230 42,626 307,418 Total 42,237 89,744 10,034 67,228 689,297 Note: PV-10 is a non-GAAP financial measure. See "Non-GAAP Financial Measures."  

A reconciliation of proved reserves from the end of 2017 is shown below.

  Oil Equivalents (Mboe) Proved Reserves at December 31, 2017 65,351 Revision to previous estimates (6,570 ) Extensions and discoveries 14,979 Purchases of minerals in place 877 Sales of minerals in place (3,829 ) Production (3,580 ) Proved Reserves at December 31, 2018 67,228    

In addition, total probable reserves at year end 2018 were approximately 107 MMBOE an increase of 34 MMBOE or 47% over year end 2017. A number of these probable reserves would qualify as proved undeveloped (PUD) from an engineering standpoint, but cannot be included as proved due to the SEC rules as to timing and capital availability. The SEC PV10 of these probable reserves was approximately $461 million.

Divestiture Activities

The marketing process for the North Dakota assets by Petrie Partners has begun, and a number of parties have expressed interest and/or are evaluating the opportunity. Although it’s too early to speculate on the outcome of this process, the Company is encouraged with the interest and activity to date. Abraxas expects to be in a position to offer more substantive commentary on the marketing efforts in the near future and will provide feedback at that time.

Comments

Bob Watson, CEO, commented, “Our ongoing drilling and completion operation in the Delaware Basin has been successful in proving up more locations than we can technically book as proved undeveloped under the current SEC rules, but it has been pleasing nonetheless. Our employees in North Dakota have done an excellent job in keeping production up under very harsh conditions. We appreciate their efforts.”

Conference Call

Abraxas Petroleum Corporation (NASDAQ:AXAS) will host its fourth quarter and year end 2018 earnings conference call at 3 PM ET on Thursday March 14, 2019. To participate in the conference call, please dial 844.347.1028 and enter the passcode 9495807. Additionally, a live listen only webcast of the conference call can be accessed under the investor relations section of the Abraxas website at www.abraxaspetroleum.com. A replay of the conference call will be available through April 13, 2019 by dialing 855.859.2056 and entering the passcode 9495807 or can be accessed under the investor relations section of the Abraxas website.

Abraxas Petroleum Corporation is a San Antonio based crude oil and natural gas exploration and production company with operations across the Permian Basin, Rocky Mountain, and South Texas regions of the United States.

Safe Harbor for forward-looking statements: Statements in this release looking forward in time involve known and unknown risks and uncertainties, which may cause Abraxas’ actual results in future periods to be materially different from any future performance suggested in this release. Such factors may include, but may not be necessarily limited to, changes in the prices received by Abraxas for crude oil and natural gas. In addition, Abraxas’ future crude oil and natural gas production is highly dependent upon Abraxas’ level of success in acquiring or finding additional reserves. Further, Abraxas operates in an industry sector where the value of securities is highly volatile and may be influenced by economic and other factors beyond Abraxas’ control. In the context of forward-looking information provided for in this release, reference is made to the discussion of risk factors detailed in Abraxas’ filings with the Securities and Exchange Commission during the past 12 months.

    ABRAXAS PETROLEUM CORPORATION CONSOLIDATED   FINANCIAL HIGHLIGHTS  

Three Months EndedDecember 31,

Twelve Months EndedDecember 31,

(In thousands except per share data)   2018       2017     2018       2017   Financial Results: Revenue $ 35,996 $ 29,588 $ 149,167 $ 86,264 Net income (loss) 55,819 (4,109 ) 57,821 16,006 Net income (loss) per share - basic $ 0.34 $ (0.02 ) $ 0.35 $ 0.10 Net income (loss) per share - diluted $ 0.33 $ (0.02 ) $ 0.34 $ 0.10 Capital expenditures - acquisitions 5,061 31,409 41,465 31,409 Capital expenditures - drilling and completion 38,905 12,306 130,231 103,669 Total capital expenditures 43,966 43,715 171,696 135,078 EBITDA(a) 20,116 17,589 83,856 53,139 Adjusted net income, excluding certain non-cash items(a) 4,081 7,149 30,723 20,305 Adjusted net income, excluding certain non-cash items, per share - basic(a) $ 0.02 $ 0.04 $ 0.19 $ 0.13 Adjusted net income, excluding certain non-cash items, per share - diluted(a) $ 0.02 $ 0.04 $ 0.18 $ 0.12 Liquidity(a) 20,617 52,368 20,617 52,368 Weighted average shares outstanding - basic 165,843 164,411 165,635 161,141 Weighted average shares outstanding - diluted 167,829 166,519 167,689 162,844   Production from Continuing Operations: Crude oil per day (Bblpd) 7,206 5,325 6,323 4,311 Natural gas per day (Mcfpd) 12,010 12,334 12,567 10,655 Natural gas liquids per day (Bblpd) 1,285 1,407 1,392 1,304 Crude oil equivalent per day (Boepd) 10,493 8,788 9,809 7,391 Crude oil equivalent (Mboe) 965 808 3,580 2,698   Realized Prices, net of realized hedging activity: Crude oil ($ per Bbl) $ 45.16 $ 49.86 $ 57.51 $ 48.24 Natural gas ($ per Mcf) 1.78 1.78 1.71 1.81 Natural gas liquids ($ per Bbl) 13.00 16.59 16.28 11.99 Crude oil equivalent ($ per Boe) 34.65 35.37 36.31 32.86   Expenses: Lease operating ($ per Boe) $ 7.54 $ 4.41 $ 6.79 $ 5.63 Production taxes (% of oil and gas revenue) 8.0 % 8.1 % 8.1 % 8.4 % General and administrative, excluding stock-based compensation ($ per Boe) $ 3.30 $ 5.99 $ 2.70 $ 4.83 Cash interest ($ per Boe) 2.50 1.19 1.97 0.93 Depreciation, depletion and amortization ($ per Boe) 13.38 10.59 11.94 9.72   (a) See reconciliation of non-GAAP financial measures below.     ABRAXAS PETROLEUM CORPORATION CONSOLIDATED   BALANCE SHEET DATA   (In thousands)

December 31,2018

December 31,2017

Cash $ 867 $ 1,618 Working capital (13,632 ) (34,361 ) Property and equipment - net 363,218 237,767 Total assets 425,890 273,806   Long-term debt - less current maturities 183,091 87,354 Stockholders' equity 166,510 106,308 Common shares outstanding 166,714 165,890   Working capital per bank loan covenants(a) (22,351 ) (23,262 )   (a) Excludes current maturities of long-term debt and current derivative assets and liabilities in accordance with our bank loan covenants. This working capital calculation excludes the unused commitment amount which is included for our current ratio calculation. As of December 31, 2018, the Company was in violation of its current ratio covenant under its credit facility and a waiver was obtained.   ABRAXAS PETROLEUM CORPORATION CONSOLIDATED   STATEMENTS OF OPERATIONS   Twelve Months Ended December 31, (In thousands except per share data)   2018       2017       2016   Revenues: Oil $ 132,904 $ 73,584 $ 50,965 Gas 7,854 6,898 3,978 Natural gas liquids 8,272 5,707 1,550 Other   137     75     62   149,167 86,264 56,555 Operating costs and expenses: Lease operating 24,300 15,197 18,205 Production and ad valorem taxes 12,023 7,228 5,454 Rig expense - - 664 Depreciation, depletion, amortization and accretion 43,275 26,677 24,922 Impairment - - 67,626 General and administrative (including stock-based compensation of $2,366, $3,238 and $3,194 respectively)   12,041     16,276     13,562     91,639     65,378     130,433   Operating income (loss) 57,528 20,886 (73,878 )   Other (income) expense: Interest income (1 ) (1 ) (1 ) Interest expense 7,053 2,497 3,828 Amortization of deferred financing fees 440 423 1,019 (Gain) loss on derivative contracts (8,060 ) 1,849 18,028 Loss (gain) on sale of non-oil and gas assets 181 (102 ) (374 ) Other   94     214     -     (293 )   4,880     22,500   Income (loss) before income tax 57,821 16,006 (96,378 ) Income tax (expense) benefit   -     -     -   Net income (loss) $ 57,821   $ 16,006   $ (96,378 )   Net income (loss) per common share - basic $ 0.35 $ 0.10 $ (0.79 )   Net income (loss) per common share - diluted $ 0.34 $ 0.10 $ (0.79 )   Weighted average shares outstanding: Basic 165,635 161,141 122,132 Diluted 167,689 162,844 122,132  

ABRAXAS PETROLEUM CORPORATIONRECONCILIATION OF NON-GAAP FINANCIAL MEASURES

To fully assess Abraxas’ operating results, management believes that, although not prescribed under generally accepted accounting principles ("GAAP") in the United States of America, EBITDA is an appropriate measure of Abraxas' ability to satisfy capital expenditure obligations and working capital requirements. EBITDA is defined as net income plus interest expense, deferred income taxes, depreciation, depletion and amortization expenses, impairments, unrealized gains and losses on derivative contracts, and stock-based compensation. EBITDA is a non-GAAP financial measure as defined under SEC rules. EBITDA should not be considered in isolation or as a substitute for other financial measurements prepared in accordance with GAAP or as a measure of the Company's profitability or liquidity. EBITDA excludes some, but not all items that affect net income and may vary among companies. The EBITDA presented below may not be comparable to similarly titled measures of other companies.

We have also disclosed Adjusted EBITDA per bank loan covenants. Adjusted EBITDA per bank loan covenants is a non-GAAP financial measure as defined under SEC rules. Our management believes that information regarding Adjusted EBITDA per bank loan covenants is material to an understanding of our financial condition and liquidity. Adjusted EBITDA per bank loan covenants should not be considered in isolation or as a substitute for other financial measurements prepared in accordance with GAAP or as a measure of the Company's profitability or liquidity. Adjusted EBITDA per bank loan covenants presented below may not be comparable to similarly titled measures of other companies.

The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net income for the periods presented.

   

Three Months EndedDecember 31,

Twelve Months EndedDecember 31,

(In thousands)   2018       2017     2018       2017 Net income (loss) $ 55,819 $ (4,109 ) $ 57,821 $ 16,006 Net interest expense 2,409 959 7,052 2,496 Depreciation, depletion, amortization and accretion 13,034 8,673 43,275 26,677 Amortization of deferred financing fees 120 69 440 423 Stock-based compensation 472 739 2,366 3,238 Unrealized (gain) loss on derivative contracts     (51,738 )     11,258       (27,098 )     4,299 EBITDA   $ 20,116     $ 17,589     $ 83,856     $ 53,139   EBITDA $ 20,116 $ 17,589 $ 83,856 $ 53,139 Expenses related to equity offering/loan amendments/permitted acquisitions     8       164       325       4,856 Adjusted EBITDA per bank loan covenants   $ 20,124     $ 17,753     $ 84,181     $ 57,995  

This release also includes a discussion of “adjusted net income, excluding certain non-cash items,” which is also a non-GAAP financial measure as defined under SEC rules. The following table provides a reconciliation of adjusted net income, excluding ceiling test impairment and unrealized changes in derivative contracts. Management believes that net income calculated in accordance with GAAP is the most directly comparable measure to adjusted net income, excluding certain non-cash items. The calculation of adjusted net income, excluding certain non-cash items presented below may not be comparable to similarly titled measures of other companies.

Unrealized gains or losses on derivative contracts are based on mark-to-market valuations which are non-cash in nature and may fluctuate drastically from period to period. As commodity prices fluctuate, these derivative contracts are valued against current market prices at the end of each reporting period in accordance with Accounting Standards Codification 815: Derivatives and Hedging as amended and interpreted, which requires Abraxas to record a gain or loss based on the calculated value difference from the previous period-end valuation for open contracts. For example, NYMEX oil prices on December 29, 2017 were $60.42 per barrel compared to $45.41 on December 31, 2018; therefore, the mark-to-market valuation changed considerably from period to period.

   

Three Months EndedDecember 31,

Twelve Months EndedDecember 31,

(In thousands)   2018       2017     2018       2017 Net income (loss) $ 55,819 $ (4,109 ) $ 57,821 $ 16,006 Unrealized (gain) loss on derivative contracts     (51,738 )     11,258       (27,098 )     4,299 Adjusted net income, excluding certain non-cash items   $ 4,081     $ 7,149     $ 30,723     $ 20,305 Net income per share - basic   $ 0.34     $ (0.02 )   $ 0.35     $ 0.10 Net income per share - diluted   $ 0.33     $ (0.02 )   $ 0.34     $ 0.10 Adjusted net income, excluding certain non-cash items, per share - basic   $ 0.02     $ 0.04     $ 0.19     $ 0.13 Adjusted net income, excluding certain non-cash items, per share - diluted   $ 0.02     $ 0.04     $ 0.18     $ 0.12  

Liquidity is calculated by adding the net funds available under our revolving credit facility and cash and cash equivalents. We use liquidity as an indicator of the Company's ability to fund development and exploration activities. However, this measurement has limitations. This measurement can vary from year-to-year for the Company and can vary among companies based on what is or is not included in the measurement on a company's financial statements. This measurement is provided in addition to, and not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP (including the notes), included in our SEC filings and posted on our website.

    (In thousands)

December 31,2018

December 31,2017

Borrowing base $ 200,000 $ 135,000 Cash and cash equivalents 867 1,618 Revolving credit facility- outstanding borrowings (180,000 ) (84,000 ) Outstanding letters of credit     (250 )     (250 ) Liquidity   $ 20,617     $ 52,368  

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Steven P. HarrisVice President - Chief Financial OfficerTelephone 210.490.4788sharris@abraxaspetroleum.comwww.abraxaspetroleum.com